MCI, the US telecoms group, is expected to announce today that it has agreed to sell its entire Internet assets to Cable and Wireless of the UK in a deal valued at up to $2 billion.
The two companies were last night waiting for approval for the sale from the US Department of Justice. The disposal had been demanded by US and European authorities as a condition for approving the proposed $37 billion merger of MCI with WorldCom.
The European Union, in particular, ruled that MCI's agreement in May to sell its wholesale, or "backbone", Internet business to C&W for £625 million ($381 million) was not enough to quiet concerns about the dominance MCI and WorldCom together could exert over the Internet.
Completion of the WorldCom/ MCI merger, which still awaits final approval from the US Federal Communications Commission, is expected to unlock a fresh round of takeover activity in the US.
There was some surprise last night that C&W had come out ahead of US carriers in the bidding for MCI's Internet business. It will be seen as a fresh triumph for Mr Dick Brown, C&W's chief executive.
C&W will now acquire the company's wholesale operations, together with MCI's retail business, corporate and residential customers, along with engineering support and sales activities. There had been fears the delay caused by the decision to sell the retail business as well as the backbone operations could allow rivals to make bids.
A purchase by C&W would represent a reversal of the trend which has seen the leading Internet backbone companies fall under the control of bigger telecoms groups which control the physical networks on which Internet and voice traffic is carried.
WorldCom bought Uunet, the largest backbone provider, two years ago, laying the foundation for its position in the Internet business. Another large independent company, BBN, was acquired last year by GTE.
Purchase of the MCI assets would give C&W some of the facilities to handle Internet traffic, including the routing equipment which governs the movement of data. However, unlike its main rivals in the backbone business, it would still have to rely on other companies' networks to actually carry the traffic.
